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Friday October 24, 2014



Family Dollar Opens 8,000th Store

Family Dollar Stores Inc. (FDO), a discount store operator, reported its quarterly earnings on October 9. The company reported increased earnings and beat analyst estimates for earnings per share.

Family Dollar reported revenue of $2.5 billion for the quarter. This represents an increase from last year when the company reported revenue of $2.36 billion. However, analysts expected earnings of $2.56 billion.

The company reported net income of $102.2 million. This represents an increase from the same period last year when the company reported net income of $80.93 million. Earnings per share increased from $0.70 during the comparable period last year to $0.86. This beat analysts' estimates that earnings per share would be $0.84.

"This morning we reported record sales and earnings results for the fourth quarter and fiscal 2013," said Howard R. Levine, Chairman and CEO. "While the environment was more challenging than expected, I am pleased with our progress. We have increased our market share, we have stabilized margins and we are increasing profitability. Our strategy is working and we remain on course with our long-term goal to drive continued profitable growth and increase shareholder returns."

On October 10, Family Dollar celebrated the opening of its 8,000th store in Lancaster, South Carolina. "I'm thrilled to open our 8,000th store," said Howard Levine. "We have over 200 stores in South Carolina, so it certainly is a great fit for us to open this landmark store in the state."

Family Dollar Stores Inc. (FDO) shares ended the week at $69.71, down 3.5% for the week.

Farmer Brothers Reports Net Loss

Farmer Brothers Co. (FARM), a roaster and retailer of coffee and coffee-related products, reported its quarterly and annual earnings on October 9. The company reported a slight increase in annual revenue, but reported a net loss for the year.

Farmer Brothers reported quarterly revenue of $128.76 million and annual revenue of $509.96 million. Annual revenue increased 2.9% over fiscal year 2012 when the company reported annual revenue of $495.44 million.

The company reported an annual net loss from operations of $8.46 million. This is an improvement from last year when the company reported a net loss of $26.58 million.

"Our product innovation efforts, combined with our increased emphasis on sales and marketing, enabled us to realize growth in our national account business and report improved fourth quarter and fiscal year financial results," said Mike Keown, Farmer Brothers President and CEO. "Going forward, I believe we have made considerable progress in the year and I am confident that we have the right strategies and organization to continue."

In May of this year, Farmer Brothers entered the growing premium coffee market with its Metropolitan line of coffees. "With this addition of new single-origin and flavored coffees, we will continue to provide the excellent taste and quality customers have come to expect," said Mike Keown. Single-origin is the term used in the coffee industry to describe coffee beans grown at a specific geographic location, which can include a single farm or a group of farms. Single-origin coffee can have a specific taste that is seen as a way to add value and thus greater appeal to consumers.

Farmer Brothers Co. (FARM) shares ended the week at $15.80, up 2.4% for the week.

Safeway Reports Solid Earnings

Safeway, Inc. (SWY), one of the largest food and drug retailers in North America, reported its quarterly earnings on October 10. The company beat projections resulting in a 7.14% increase in its stock price for the week.

Safeway reported quarterly revenue of $8.62 billion for the quarter ending September 7. Safeway reported similar revenue last year of $8.52 billion. This quarter's revenue figure beat projections that Safeway's quarterly revenue would be $8.53 billion.

The company reported net income of $65.8 million. This represents a significant decrease from the same period last year when Safeway reported net income of $157 million. Earnings per share came in at $0.27, beating analysts' estimates of $0.16 per share.

On October 10, Safeway announced that it will leave the Chicago and Canadian markets. Safeway sold the net assets of Canada Safeway Limited ("CSL") and plans to leave Chicago where it operates 72 Dominick's stores.

"The decision to sell Canada Safeway and to exit the Chicago market is consistent with Safeway's priority of maximizing shareholder value," said Robert Edwards President and CEO. "These actions will allow us to focus on improving and strengthening our core grocery business. We are continuing to review all of our businesses to optimize our allocation of resources, improve sales and grow operating profits."

Safeway, Inc. (SWY) shares ended the week at $33.75, up 7.14% for the week.

The Dow started the week at 15,069 and closed at 15,237. The S&P 500 started the week at 1,687 and closed at 1,703. The NASDAQ started the week at 3,777 and closed at 3,792.

Treasuries Fall As Hope for Deal Rises

Yields on Treasury notes fell for the first time in several days on October 11 as House Republicans met with President Obama to discuss a proposal to push back the debt ceiling deadline to November 22. Although this would be merely a short-term solution, it would be welcome news for investors worried that the stalemate in Washington will cause the U.S. to default on its obligations on October 17.

Yields on Treasury notes with longer maturities increased only slightly last week while yields on Treasuries maturing in one month rose to their highest level in five years. This shows that investors are uncertain about whether a deal will be reached by October 17, but are confident that at some point in the near future a deal will be reached.

"Although the shutdown of the federal government and lack of agreement in Congress on extending the debt ceiling have pushed up the cost of insuring against a default by the U.S. sovereign, this development has not had an adverse impact on longer-dated Treasuries so far," said John Higgins, Chief Markets Economist at Capital Economics.

The yield on the 10-year Treasury note rose 5 basis points to 2.71% last week before dropping to 2.66% in early Friday morning trading. Meanwhile, the yield on the 1-month Treasury note rose from 0.13% to 0.33% on October 8 before dropping to 0.25% on October 11. The yield on October 8 was the highest yield for the 1-month Treasury note in five years.

For the moment, the negotiations surrounding the budget and the debt ceiling have eclipsed the discussion over whether the Federal Reserve will begin tapering its bond purchasing program. The Fed decided to continue its bond purchases at its meeting last month. Fed Chairman Ben Bernanke has noted that the decision is based largely on economic data. The release of much of this month's economic data will be delayed due to the government shutdown. So, for now, all eyes are on Congress.

The 10-year Treasury note yield finished the week at 2.68% while the 30-year Treasury note yield finished the week at 3.74%.

Interest Rates Relatively Unchanged

Freddie Mac released the results of its weekly Primary Mortgage Market Survey on October 10. The results show that mortgage rates remained relatively stable this week.

The 30-year fixed rate mortgage averaged 4.23% this week. This is a slight increase from last week when it averaged 4.22%. Last year at this time the fixed rate mortgage averaged 3.39%.

The 15-year fixed rate mortgage averaged 3.31%. This is an increase from last week when it averaged 3.29%. One year ago, the fixed rate mortgage averaged 2.7%.

"Mortgage rates were little changed amid the federal debt impasse in Washington D.C. and a light week of economic data releases," said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. "Of the few releases, the private sector added an estimated 166,000 jobs in September, which were fewer than the market consensus and followed a downward revision of 17,000 workers in August, according to the ADP Research Institute. The Institute for Supply Management reported a greater slowing in growth in the nonmanufacturing industry in September than the market consensus forecast."

The money market fund finished this week at 0.4%. The 1-year CD finished at 0.7%.

Published October 11, 2013

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